Company reaches $100 million in ACV, double-digit enterprise growth and strong profitability.

Absolute (TSX: ABT) ('Absolute' or the 'Company'), the leader in endpoint resilience, today announced its financial results for the three and six months ended December 31, 2019. All dollar figures are stated in U.S. dollars, unless otherwise indicated.

'We are pleased to report continued strength in our Enterprise market, and strong profitability across the business,' said Christy Wyatt, CEO of Absolute. 'During Q2 we hit a significant milestone, surpassing $100 million in our ACV base. Our unique firmware-embedded position means we have roots into the most trusted part of the endpoint device, enabling us to be the most trusted partner for our customers. This led to us to adding five new Fortune 500 customers and driving notable customer expansions and wins with Mercy Health, State of Louisiana, and Hamilton Health Sciences.'

Second Quarter Fiscal 2020 Financial Highlights

Total revenue in Q2-F2020 was $25.8 million, representing a year-over-year increase of 6%. Year-to-date total revenue was $51.4 million, representing an increase of 6% over the prior year-to-date period.

The Annual Contract Value Base ('ACV Base') at December 31, 2019 was $100.3 million, representing an increase of 5% over the prior year balance and a sequential increase of 1% over Q1-F2020.

The Enterprise & Government portions of the ACV Base, combined, increased by 12% annually and by 4% sequentially. Enterprise & Government sector customers represented 69% of the ACV Base at December 31, 2019.

The Education sector portion of the ACV Base decreased by 8% annually and by 4% sequentially. Education sector customers represented 31% of the ACV Base at December 31, 2019.

Incremental ACV from New Customers was $1.3M in Q2-F2020, compared to $1.0 million in Q2-F2019.

Net ACV Retention from existing customers was 100% in Q2-F2020, compared with 101% in Q2-F2019.

Adjusted EBITDA in Q2-F2020 was $6.2 million, or 24% of revenue. Adjusted EBITDA - pre-IFRS 16 was $5.7 million, or 22% of revenue, compared to $4.5 million, or 18% of revenue, in Q2-F2019. Year-to-date Adjusted EBITDA was $13.2 million, or 26% of revenue. Year-to-date Adjusted EBITDA - pre-IFRS 16 was $12.3 million, or 24% of revenue, compared with $8.6 million, or 18% of revenue, in the prior year-to-date period.

Cash generated from operating activities in Q2-F2020 was $2.2 million. Cash from operating activities - pre-IFRS 16 in Q2-F2020 was $1.8 million, compared to $1.9 million in Q2-F2019. Year-to-date cash from operating activities was $9.6 million. Year-to-date cash from operating activities - pre-IFRS 16 was $8.8 million, compared with $5.9 million in the prior year-to-date period.

Absolute paid a quarterly dividend of CAD$0.08 per common share during Q2-F2020.

Quarterly Developments

In October 2019, Absolute announced the appointment of Will Morris as Executive Vice President, Engineering, and Ameer Karim Executive Vice President, Product Management.

In October 2019, the Company partnered with ServiceNow to certify the Absolute ITSM Connector for ServiceNow, enabling joint customers to view Absolute's single source of truth asset intelligence for Windows and Mac devices.

In November 2019, Absolute hosted its Financial Analyst Dayin New York. The event featured executives from across the Company who provided technical and business updates, and Absolute's strategy around Resilience to financial analysts and shareholders.

In December 2019, the Company expanded the ecosystem of security controls and applications that Absolute customers can persist, self-heal, and ensure are undeletable - adding VMware Workspace ONE, VMware Carbon Black, CrowdStrike Falcon and Netcloud to the nearly 40 applications that make up the growing Absolute Resilience ecosystem.

In December 2019, Absolute saw its first Persistence as a Service (PaaS) licensee ship their Persistence enabled application and start to onboard with their first customers.

In December 2019, Absolute activated its first public cloud data center in the EU - a significant milestone in Absolute's journey to the cloud and an important enabler for access to the EU market more broadly.

In December 2019, Absolute introduced a software release with several new user interface enhancements. This included a new Missing Devices feature, making it easier for Absolute's customers to manage their deployments, including the ability to locate, track and manage missing devices.

Summary of Key Financial Metrics

summary of key financial metrics

Notes:

1.Commercial recurring revenue represents revenue derived from Cloud Services (as defined below) and recurring managed professional services, both of which are included as part of our ACV Base. Other revenue represents revenue derived from non-recurring professional services and ancillary product lines, including consumer products.

2.Throughout this document, 'Adjusted EBITDA' is used as a profitability measure. Please refer to the 'Non-IFRS Measures' section of this MD&A for further discussion on this and other non-IFRS measures.

3.The Company adopted IFRS 16, 'Leases', effective July 1, 2019 using the modified retrospective approach (please refer to the 'New Accounting Pronouncements' section of this MD&A and to Note 2(e) in the notes to the Q2-F2020 Condensed Consolidated Financial Statements). Accordingly, financial information presented for fiscal 2019 has not been adjusted for the impact of the adoption of IFRS 16. Figures presented that include the title 'pre-IFRS 16' represent operating results had IFRS 16 not been adopted, and provide a meaningful comparative to similar operating results for F2019.

F2020 Corporate Outlook

The Company's outlook for F2020 is unchanged and is as follows:

Revenue is expected to be between $103 million and $106 million, representing 4% to 7% annual growth.

Adjusted EBITDA is expected to be between 18% and 22% of revenue.

Cash from operating activities is expected to be between 16% and 22% of revenue.

Capital expenditures are expected to be between $3.5 million and $4.0 million.

The Company's forecast for Adjusted EBITDA and cash from operating activities incorporates the impact of IFRS 16, 'Leases', which was adopted July 1, 2019. IFRS 16 is expected to positively impact both F2020 Adjusted EBITDA and cash from operating activities by approximately $2.0 million as a result of amortization of right of use assets and from increased interest expense. See 'New Accounting Pronouncements' in the Company's December 31, 2019 MD&A.

The foregoing expectations constitute forward-looking information and financial outlook and are qualified in their entirety by the cautionary statement below.

Quarterly Dividend

On January 20, 2020, the Company declared a quarterly dividend of CAD$0.08 per share on its common shares, payable in cash on February 28, 2020 to shareholders of record at the close of business on February 7, 2020.

Quarterly Filings

Management's Discussion and Analysis ('MD&A') and Consolidated Financial Statements and the notes thereto for the fiscal period ended December 31, 2019 can be obtained today from Absolute's corporate website at www.absolute.com. The documents will also be available under Absolute's profile at www.sedar.com.

Notice of Conference Call

Absolute will hold a conference call to discuss its Q2-F2020 financial results on Monday, February 3, 2020, at 5:00 p.m. ET (2:00 p.m. PT). All interested parties can join the call by dialing 647-427-7450 or 1-888-231-8191. Please dial-in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Monday, February 10, 2020 at midnight. To access the archived conference call, please dial 416-849-0833 or 1-855-859-2056 and enter the reservation code 5717697.

A live audio webcast of the conference call will be available at www.absolute.com and here. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available on the Company's website for 90 days.

Non-IFRS Measures and Definitions

Throughout this press release, the Company refers to a number of measures that the Company believes are meaningful in the assessment of the Company's performance. All these metrics are nonstandard measures under International Financial Reporting Standards ('IFRS'), and are unlikely to be comparable to similarly titled measures reported by other companies. Readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results or cash flows from operations as determined in accordance with IFRS. For a discussion of the purpose of these non-IFRS measures, please refer to the Company's MD&A for the period ended June 30, 2019.

These measures, as well as their method of calculation or reconciliation to IFRS measures, are as follows:

1.ACV Base, Net ACV Retention and ACV from New Customers

As the majority of the Company's customer contracts are sold under multiyear term licenses, there is a significant lag between the timing of the billing and the associated revenue recognition. As a result, the Company focuses on the aggregate annualized value of its subscriptions under contract, measured by Annual Contract Value, as an indicator of its future revenues.

The ACV Base measures the amount of recurring annual revenue Absolute will receive from its commercial customers under contract at a point in time, and therefore is an indicator of the Company's future revenue streams. Net ACV Retention measures the percentage increase or decrease in the Commercial ACV Base at the end of a period for the customers that made up the Commercial ACV Base at the beginning of the same period. This metric provides insight into the effectiveness of Absolute's customer retention and expansion functions. ACV from New Customers measures the addition to the Commercial ACV Base from sales to new commercial customers during the quarter.

We believe that increases in the amount of ACV from New Customers, and improvement in the Company's Net ACV Retention, will grow our Commercial ACV Base and, in turn, our future revenues.

2.Adjusted EBITDA and Adjusted EBITDA - pre-IFRS 16

Management believes that analyzing operating results exclusive of significant noncash items or items not controllable in the period provides a useful measure of the Company's performance. The term 'Adjusted EBITDA' refers to earnings before deducting interest and investment gains (losses), income taxes, amortization of property and equipment and right of use assets, foreign exchange gain or loss, share-based compensation, and restructuring and reorganization charges and post-retirement benefits. The items excluded in the determination of Adjusted EBITDA are share-based compensation, amortization of property and equipment and right of use assets, and restructuring and reorganization charges and certain post-retirement benefits.

Management believes that presenting F2020 Adjusted EBITDA on a pre-IFRS 16 basis will provide a meaningful comparative to F2019 Adjusted EBITDA.

About Absolute

Absolute empowers more than 12,000 customers worldwide to protect devices, data, applications, and users against theft or attack-both on and off the corporate network. With the industry's only tamper-proof endpoint visibility and control solution, Absolute allows IT organizations to enforce asset management, security hygiene, and data compliance for today's remote digital workforces. Absolute's patented Persistence technology is embedded in the firmware of Dell, HP, Lenovo, and 22 other leading manufacturers' devices for vendor-agnostic coverage, tamper-proof resilience, and ease of deployment. See how it works at www.absolute.com and follow us at @absolutecorp.

2020 Absolute Software Corporation. All rights reserved. ABSOLUTE, the ABSOLUTE logo, and PERSISTENCE are registered trademarks of Absolute Software Corporation. Other names or logos mentioned herein may be the trademarks of their respective owners. For patent information, visit www.absolute.com/patents.

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